Bank of America Gets More Bail Out $$$$

A story by Dan Fitzpatrick, Damian Paletta and Susanne Craig in the WSJ for tomorrow caught my eye: “Bank of America to Get Billions in U.S. Aid: Sides Finalizing Terms for Fresh Bailout Cash; Lender Told Government It Needed Funds to Close Deal for Struggling Merrill.” (if you cannot read the story, add “mod=googlenews_wsj” after the html

Discussions over these funds began in mid-December when Bank of America approached the Treasury Department. The bank, already the recipient of $25 billion in committed federal rescue funds, said that it was unlikely to complete its Jan. 1 purchase of the ailing Wall Street securities firm because of Merrill’s larger-than-expected losses in the fourth quarter, according a person familiar with the talks.

Treasury, concerned the deal’s failure could affect the stability of U.S. financial markets, agreed to work with the Charlotte, N.C., lender on the “formulation of a plan” that includes new capital from the $700 billion Troubled Asset Relief Program, according to the person familiar with the talks. The amount and terms are still being finalized, this person said. Details are expected to be announced with Bank of America’s fourth-quarter earnings, due out Jan. 20.

Any possible arrangement might protect Bank of America from losses on Merrill’s bad assets. There would be a cap on the amount of losses the bank would have to absorb, with the federal government being on the hook for the remainder, said one person familiar with the matter.

Both the Federal Reserve and the Federal Deposit Insurance Corp., alongside the Treasury, are involved in the negotiations, say people familiar with them. That suggests that the aid could take a similar form to the hand extended to Citigroup Inc. late last year.

A cap on losses, but not a share of profits? Sorry, but that looks like more corporate welfare. Another case of “what’s yours is mine and what’s mine is mine, too.”

Bank of America has received pressure in a national campaign by the RainForest Action Network due to its investment in coal-fired electric plants and coal companies to practice mountaintop removal.

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